By Randall Osborne
Almost three years after shareholders of Synergen Inc. settled their lawsuit over the anti-sepsis drug, Antril, for $28 million, an investment partnership has agreed to accept $17 million to end its litigation against the company, now owned by Amgen Inc.
If Antril, an interleukin-1 receptor antagonist, reaches the market for any indication, Amgen could pay the partnership up to $82 million, under the terms of the settlement expected to be made public today.
The private partnership of 1,200 members, assembled in 1991 by PaineWebber Inc., of New York, claimed that Boulder, Colo.-based Synergen delayed releasing negative data on Antril until key executives in the company sold their personal holdings, netting more than $12 million.
Each limited partner had invested at least $25,000, to be paid in four installments over three years, for a total of $50 million. Each investment package included a 2,500-share stock warrant that matured on March 1, 1993.
Synergen's first Phase III trial of Antril failed in February 1993, sending the company's stock down about 68 percent, to $13.50 per share. The partnership's stock warrants' exercise price was $15.69 per share. (See BioWorld Today, April 2, 1993, p. 1.)
"They left us out in the cold," said Kim Stephens, an attorney with Seattle-based Tousley Brain PLLC, the firm that filed the partnership's lawsuit.
Larry Soll, board chairman of Synergen at the time, said the incident was "unfortunate timing" for the partnership investors.
"Once we had the trial results, we had to announce them," Soll said.
A year earlier, Soll had sold 70,000 of his Synergen shares for $4.77 million. He was one of nine company officials, including top executives Jon Saxe and Gregory Abbott, who sold more than 187,000 shares in January 1992.
Stephens said all "sold within a week, and supposedly without talking to one another."
In November of the previous year, Synergen had released preliminary results from a Phase II trial in which Antril seemed to reduce sepsis mortality rates. (See BioWorld Today, Nov. 8, 1991, p. 1.)
But, according to the lawsuit, patients in the placebo group of that trial were sicker than those receiving Antril, they had life support withdrawn at a greater rate, and among them were three so ill that including them violated the trial's protocol.
Phase II Data Called Problematic
Overall results of the Phase II trial showed no benefit for sepsis patients who had not reached the point of septic shock, though Synergen continued to say publicly that Antril would work for "all" sepsis patients, the lawsuit alleged.
"[The company] knew, or should have known, there were problems with this data," Stephens said.
Synergen began misrepresenting Antril's trials as early as 1989, when the drug was in animal studies, the lawsuit claimed.
Soll, now a director with Carlsbad, Calif.-based Isis Pharmaceuticals Inc., told BioWorld Today he did not believe Antril would fail when he sold the stock.
"I sold because I thought the price was high," he said. "I didn't sell all or half of what I owned. It might have been 20 percent."
Stephens, however, suggested Soll sold only a percentage of his stock in order not to draw attention from the Securities and Exchange Commission.
"We have a saying: Pigs get fat, and hogs get slaughtered," Stephens said. "He knew he had a better chance of getting away with it."
Saxe, then president and CEO of Synergen, sold 20,000 shares for $1.36 million. Saxe, now president of Protein Design Labs Inc., of Mountain View, Calif., could not be reached. Saxe resigned from Synergen in March 1993, and Soll became CEO for a year, he said.
Soll said he told the board he was resigning "during the wrap-up phase," as the deal with Amgen neared.
But Stephens said the board demanded Soll's resignation. "Why was he asked to leave, if this was all clean?" Stephens said.
Another Synergen executive, general counsel Abbott, sold 20,000 shares for $1.33 million. Abbott became CEO after the second Phase III trial of Antril failed in 1994, and he later departed. Abbott could not be reached.
Antril Dropped In '94; Synergen Sold
Synergen stopped its second Phase III trial of Antril in mid-study, citing interim results that were statistically insignificant. The company's stock dropped 50 percent, and Synergen laid off 375 people — 60 percent of its staff — the following month. (See BioWorld Today, July 19, 1994, p. 1, and Aug. 2, 1994, p. 1.)
Amgen, of Thousand Oaks, Calif., bought Boulder, Colo.-based Synergen in late 1994 in a deal valued at up to $258 million, and renamed it Amgen Boulder Inc. (See BioWorld Today, Nov. 21, 1994, p. 1.)
The takeover, not the plummeting of Synergen's stock price, sparked the lawsuit, Stephens said.
"Synergen insiders' stock options put them in the money when the company merged with Amgen, and they left us out there," instead of repricing the partnership's options, he said.
"They merged at $9.25 per share," Stephens said. "Why were the warrants still at $16?"
Under the partnership's investment agreement, the warrants expired in the event of a merger.
The $17 million settlement was placed in a Dallas escrow account pending an appeal, the deadline for which was late Tuesday, Stephens said. Disbursement is expected in March.
Sepsis has proven a difficult challenge for many biotech companies. More than 20 drugs have entered trials since 1980, and none has succeeded. The most recent was BAYX-1351, a compound developed by Celltech Group plc, of Slough, U.K., that failed in Phase III trials last year. (See BioWorld Today, May 22, 1997, p. 1.)
Synergen was testing Antril for rheumatoid arthritis in 1993, and Amgen is still working on that indication, said David Kaye, spokesman for Amgen.
"It does have promise in rheumatoid arthritis," Kaye said. "There's a Phase I trial ongoing with methotrexate. We want to see what happens in that trial before we decide what to do next."
Kaye said he had not seen the partnership lawsuit settlement and could not comment.
Soll, for his part, said he was "interestingly" pleased about it.
"I'd like to see the product succeed, and I'd like to see the people who invested in it share that success," Soll said.
Stephens said depositions and other documents related to the case are closed as part of the settlement, but he believed Antril would not get out of the clinic.
"The chances are very, very low," he said. "I suppose it could be used to clean up oil spills or something."
In Colorado, shareholders of Synergen settled their Antril lawsuit in 1995, when Amgen agreed to pay $28 million. (See BioWorld Today, March 9, 1995, p. 1.)
Amgen posted 1997 earnings of $644 million. The company's shares (NASDAQ:AMGN) closed Tuesday at $53.812, up $0.125. *